New Australian government realizes there is a bill associated with cancelling F/A-18 contract

by: Matthew Potter
February 20, 2008

Category: Australia, Lockheed Martin, Military Aviation, production program, Restructuring | RSS 2.0

The new liberal government in Australia has talked about canceling the contract to purchase 24 F/A-18 aircraft to be used as a gap fill until the F-35 JSF is available. See ABC News here for details. Unfortunately there is a termination fee of around $400 M (Australian) associated with cancellation. In the US contracts can be canceled for cause or needs of the government. Normally there is some sort of cost associated with this, as the contractor needs to be paid for the work done to date. This is what Australia is facing. Sometimes there are clauses written into them that force the government to pay a larger fee if the work is canceled.  In the long run it might be more cost effective to keep buying the aircraft.

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